ABSTRACT: We study the effect of encouraging private actions for breaches of
competition law. We develop a model of litigation and settlement with
asymmetric information. We show that screening liable from non-liable
defendants requires the Court to restrict the rules governing
admissible evidence. We study how to design the rules so as to enhance
the role of private litigation in antitrust enforcement and prove that
increasing damages is better than reducing costs of initiating suits.
We also find large benefits from introducing a system of compensation
for defendants found non-liable, paid by unsuccessful plaintiffs.